The Men Who Run Barclays

Management can make all the difference to a company's success and thus its share price.

To me at least, the best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. On the other hand, some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.

In this series, I'm assessing the boardrooms of companies within the FTSE 100 (UKX). I hope to separate the management teams that are worth following from those that are not.

I'm starting with Barclays (LSE: BARC), whose executive directors yesterday waived their 2012 bonuses after the bank was fined for manipulating the LIBOR rate. They have acted rather more swiftly than their colleagues at RBS (LSE: RBS) responded to its payments debacle, but it's doubtful that's enough to make up for the bank's reputation for boardroom excess.

Here are the key directors:

Director

Position

Marcus Agius

(Non-executive) Chairman

Bob Diamond

Chief executive

Chris Lucas

Finance director

Bob Diamond is an American investment banker who joined Barclays in 1996 and was appointed CEO in March last year. He built up Barclay's investment banking division from virtually nothing to being a major force, including the audacious acquisition of Lehman Brother's business when that bank collapsed. But growth has not come without risk: the division was betting heavily on Russian debt when the country defaulted in 1998.

Remuneration

Over a quarter of shareholders voted against Barclay's remuneration report after it was revealed that Bob Diamond's remuneration package for 2011 could cost up to £25m, including settlement of US tax, for a year when he admitted the bank's performance was "unacceptable". The bank had earlier claimed the remuneration was £6.3m, of which only £1.3m was not performance related.

Marcus Agius is a City grandee whose background is also in investment banking, with Lazard (NYSE: LAZ.US). Chris Lucas is former global head of banking at PriceWaterhouseCoopers. Of Barclay's nine non-execs, five are former investment bankers and four have finance and management backgrounds. There are, incidentally, two women.

I analyse management teams from five different angles to help work out a verdict on the board. Here's my assessment:

Score

1. Reputation. Management CVs and track record.

Bob Diamond has been called "great but lucky".

3/5

2. Performance. Success at the company.

Shares have dropped 40% since Bob Diamond’s appointment.

2/5

3. Board Composition. Skills, experience, balance.

12 great and good, but a preponderance of former investment bankers.

1/5

4. Remuneration.Fairness of pay, link to performance.

‘Nuff said.

1/5

5. Directors’ Holdings, compared to their pay.

Bob Diamond has £26m worth of shares – a whole year’s remuneration!

4/5

Overall, Barclays scores 11 out of 25 for me. As this is the first in the series, it's hard to benchmark -- but on this analysis I believe the board is below average for the FTSE 100.

Astonished

I'm astonished that, as far as I can tell, nobody on the board of Barclays has experience in retail or commercial banking. At the recent AGM Marcus Agius said that the 'three Rs' of regulation, remuneration and reputation were crucial to the bank. Its remuneration policy is widely discredited. Its reputation has taken a big hit with the LIBOR scandal. And as for regulation, if the government's plans to ring-fence high-street banking operations are implemented, the board looks somewhat deficient to look after the ring-fenced part.

Let me finish off by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares he should buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent UK blue chip. Buffett's investment decision is covered in full within this special report -- but hurry, "The One UK Share Warren Buffett Loves" is free for a limited time only.

Whilst Barclays did not take government money it was only due to the investment from Abu Dhabi/Qatar entities that it was able to continue its operations without the shackles of the UK taxpayer. Essentially they could carry on as before - and it appears like they did!!

I agree wholeheartedly with others who would like to see proceedings taken against individuals, from traders on the floor to directors in the gods. If manipulating interest rates in order to procure an advantage at the expense of customers is not fraud and deception then what is? The fine means next to nothing to the perpetrators and those responsible for this behaviour. Let's see individuals fined, the fines to include all bonuses awarded over the period of fraud, and the worst cases behind bars. Shareholders should not shoulder the total burden.

To me, Bob Diamond exemplifies everything that's wrong with modern capitalism. He as feted for making big profits at Barclays Capital. But these profits were illusory, based on being very heavily geared and, it now appears, smiling close to the wind. Did he direct the misdeeds or turn a blind eye to them, or was he unaware of what was going on in the firm he ran? Whatever the answer, he deserves to go.

The LIBOR manipulation was widely rumoured and reported in the press at the time, yet the FSA did nothing. Eventually, US regulators acted. The outcome? A sizeable fine for the company, and probably a decade of litigation. And who will pay for this? Not the directors, not the Barclays Capital management, not the traders who rigged the markets, but the myriad small shareholders who, whether directly or through their pension funds, are the economic owners of the firm. And can they dismiss the delightful Mr Diamond? Sadly not - because the system is set up to protect the hired hands that run firms on investors' behalf. A sorry state of affairs indeed.

Has anybody bought Barclays today then?. At the risk of getting a slating I'll confess I did. I'm quite new to investing but having followed the writings on here and read the quotes about being contrarian, blood on the streets, people being fearful etc etc, I thought a panic and a 15% fall in the share price was a good opportunity so I bought some?.

"Let me finish off by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares he should buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent UK blue chip. Buffett's investment decision is covered in full within this special report -- but hurry, "The One UK Share Warren Buffett Loves" is free for a limited time only."

Are words to the effect of these becoming an unofficial Fool signature?

Sadly, shareholders will shoulder the total burden. They hired these clowns, so they pay the price.

Maybe next time round, they'll vote them out of office and then call the serious fraud office, so they can investigate the matter for the next 3 years. Outcome (I cynically predict): fine appealed over and over and over, and eventually reduced to £10m because there is not enough evidence and Barclays were 'helpful' in the investigation.

Several years ago, during the "meltdown" I remember reading an article in the States about the State of Massachussetts suing Barclays. It was, if my memory serves me right, to do with toxic assets in bonds sold to them by the bank. The words that stick in my mind were "The whole thing was engineered in Canary Wharfe".Does anybody remember this or know of the outcome?

Ram59 & notsloc - thanks for the feedback on the series. I agree 'would you buy a used guy from the directors?' is a good test, but hope the answer comes through in the analysis.

Generally - I agree it would seem shameful if some criminal prosecutions don't eventually come out of this whole story.

Interesting piece in the Times today which gave a pen portrait of all the Barclays board - except they forgot the finance director, one of only 2 executive directors and the one most responsible for control. That says a lot about what's wrong with boards, in my view.

I have believed for many years thats Barclays is run for the benefit of the Directors. They stiffed the shareholders and the customers, and now it appears they dont care how they do it. the fine should come from a refund on the Boards remuneration - Bobs had over £100 million I believe.

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